Common Credit Reporting Errors
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Approximately 42 million Americans have errors on their credit report. Are you one of them?
Your credit score “lives and dies” by the information in your credit report. Once upon a time, credit reports were used to extend credit; however, your credit report is much more vital to your financial well-being in today’s market. Credit reports and credit scores are now being used to determine your insurance rates, whether you qualify for certain jobs, and if a landlord should rent you an apartment or lease you a house. If you are one of the 42 million Americans with errors on your credit report, you could be paying much more for some expenses and missing opportunities all because a credit reporting agency or a creditor mishandled your financial information.
Credit Reporting Agencies Close to Failing Marks
A 2013 study by the Federal Trade Commission (FTC) found that one in four consumers had errors on their credit reports that could potentially affect their credit scores. Three companies dominate the credit reporting industry — Experian, TransUnion, and Equifax. It is a billion dollar industry that is permitted to have a 25% margin of error in performing its job. In some schools and most jobs, a 75% accuracy rate is considered a failing performance.
In a study released approximately 10 years ago, 79% of credit reports contained errors and 25% of those errors could result in the consumer being denied credit. While the more recent study by the FTC demonstrates a significant improvement when compared to this study, if you are one of the 42 million Americans with errors on your credit report, the credit reporting agencies are still failing in job performance.
Credit Report Mistake Number 1: Mixed Credit Reports
This type of mistake is one of the most common mistakes found on credit reports and it can cause significant harm to your credit rating. A mixed credit file occurs when a credit reporting agency “mixes” or combines information from your credit report with the information from another person’s credit report. In most cases, this occurs when the individuals have similar names, addresses, or other personal information; however, there are many instances where it is simply an inexcusable error.
Having another person’s credit history on your credit report can lower your credit score even if that person has good credit. For example, adding additional credit to your report lowers your debt to income ratio, which could result in you being denied for a mortgage, car loan, or credit card. Mixed credit files can be one of the most difficult and frustrating credit reporting errors to correct.
Credit Report Mistake Number 2: Inaccurate Payment History
Your creditors report your payment history to the credit reporting agency. Your payment history accounts for 35% of your credit score; therefore, inaccurate information can seriously harm your credit score. Errors in credit reporting history can be made by both the credit reporting agency and the creditor.
Credit Report Mistake Number 3: Public Records
Information gathered from public records is added to your credit report including, but not limited to, tax liens, judgments, bankruptcy filings, and lawsuits. Unfortunately, this information may have been obtained through a third party who may not have verified that the person named in the judgment or lawsuit is you. Regardless of how the credit reporting agency obtains its public records information, failure to verify identity can create serious problems. It can lower your credit score but it can also create a “paper trail” where you could be identified with or as this person.
Credit Report Mistake Number 4: Collection Accounts
Collection accounts can cause serious harm to your credit rating. While debt collectors are quick to place a collection account on your credit report, they are not as quick to update the status when you pay the debt or correct inaccurate information.
Another issue with debt collectors is that they often do not receive the complete file from the creditor nor do they bother to verify the information they receive is correct. Therefore, you may have a debt collection account that is not yours placed on your credit report.
Credit Report Mistake Number 5: Stale Debt
In most cases, negative information on your credit report should be removed after seven years from the date of the initial delinquency (a Chapter 13 bankruptcy remains on your credit report for 10 years). A problem that occurs often is the “re-aging” of old debt when it is sold to another debt collector. The new “owner” of the account fails to report the initial date of delinquency for the account or the credit reporting agency does not catch that the date is older than seven years. If the individual is not aware of the laws governing stale debt, the credit reporting error may never be corrected.
Fighting Credit Reporting Errors
The Federal Trade Commission provides consumers with information on how to dispute errors on credit reports. The process can be extremely frustrating and time-consuming. In many cases, consumers become so frustrated by the process that they give up. However, there is help available.
At Weston Legal, PLLC we can assist with getting old debts settled and of collection. We can also help to settle old judgments that are showing up in the “public record” section of your report and likely preventing you from getting credit.
Your first step is to order copies of your credit reports from all three credit reporting agencies. By law, you are entitled to receive free copies of your credit reports from all three major credit reporting agencies every 12 months. You should obtain these copies each year, check each report for errors, and take immediate steps to correct errors so they do not damage your credit rating. These can be ordered for free from www.annualcreditreport.com